1. Why are all goods and services scarce?
Because all resources are scarce.
Unlimited wants and limited resources

2. Explain the difference between scarcity and a shortage.
When people have trouble supplying the goods and services at the current price.
Scarcity
A limited number of goods or services

3. Factors of Production: Resources used to make all goods and services.
LAND
LABOR
CAPITAL
Natural resources – land, coal, water, forests, etc.
Workers (effort put into production)
Human made resources.
Physical = Buildings, tools, etc.
Human = Knowledge, skills, etc

4. Human Capital Physical Capital A persons knowledge and skills
Buildings, tools )saws, hammers etc.)

5. Elements of a command/centrally planned economy
Elements of a command/centrally planned economy. What are some negatives to this system?
A central government owns all land and capital
A central government makes all economic decisions
Each person is assigned a job
Low production

6. What are the three key economic questions?
What to produce?
How to Produce?
For Whom to Produce it

7. Elements of Free Market
Encourages growth
Adam Smith key figure
Private profit motive
Profit on sales
Often some government is needed to provide for things the economy does not (welfare, wage laws etc.)

8. Traditional Economy
A society where the economic questions are answered through culture and tradition.
Children take on the jobs of their parents
Farming is typically the key profession

9. What is the function of an economic system?
To produce and distribute goods and services

10. What are some difficulties in a pure free market system?
No government intervention
Government is needed to provide for things that the market does not address.

11. Definitions:
Land: any natural resource (i.e: iron, ore, fertile soil, water etc)
Labor - the paid effort of people to do a particular task
Capital: Any resources made by humans and used to create other goods and resources.
Shortage- the good is available but cannot be brought to the consumer ; When people have trouble supplying the goods and services at the current price.
Efficient economy- uses its resources to make the most goods and services (typically at the highest price)

12. Entrepreneur -Ambitious leaders who combine land, labor and capital to create and market new goods and services.
Competition- the struggle between various producers for consumers business.
Adam Smith- Free market Economists.
Laissez Faire - hands off the Economy
Goods- Physical objects that can be exchanged
Services- Actions or activities that one person performs for another.
Factors of production – Land, Labor and Capital
Guns v. Butter- how a nation allocates its resources- either military goods or consumer goods
Economics
The study of how people use their limited resources to meet unlimited needs.